G - Physics – 06 – Q
Patent
G - Physics
06
Q
G06Q 90/00 (2006.01) G06Q 40/08 (2012.01)
Patent
CA 2540433
The invention embodies a system and method of underwriting price risk with an insured window contract. The system and method has application in any marketplace where there is a transparent price that exhibits volatility over time. It is applicable to both buyers and sellers facing price risk in the marketplace. A window is established which specifies a minimum and maximum price. Market prices outside the window result in a deposit to or withdrawl from a trust account fully owned by the participant in the insured window contract. The trust account is established to hold surpluses and deficits over the life of the contract, normally of multi-period duration. An operating account, also fully owned by the participant, is also established to serve as the participant's operational account and to receive monies from and transfer monies to the trust account. On the buyer side, market prices below the window cause monies equal to the difference between market price and minimum of the window to be transferred from the operational account to the trust account, whereas market prices above the window cause monies equal to the difference between the market price and maximum of the window to be transferred from the trust account to the operational account. On the seller side, market prices below the window cause monies equal to the difference between market price and minimum of the window to be transferred from the trust account to the operational account, whereas market prices above the window cause monies equal to the difference between the market price and maximum of the window to be transferred from the operational account to the trust account. Surpluses or deficits accrue in the trust account over the duration of the contract. At contract expiry, surpluses are transferred to the operational account to bring the trust account to a zero balance. At contract expiry, deficits are indemnified by a pre--arranged insurance policy above some retention of risk (deductible) also to bring the trust account to a zero balance. The insurance policy is put in place at the outset of the contract and comes with consideration in the form of payment of a premium. The premium may be financed with a repayment scheme structured over the life of the contract. Arrangement for contingent financing of the deficit is also arranged at the outset of the contract. The finacier's interests are secured by the insurance policy's guarantee of indemnification at the contract's expiry should there be a deficit at that time.
Grant Charles W.
Na
LandOfFree
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